Comp FI vs Equity PM?
Hi guys. I work in a boutique AM firm which covers several asset classes across the liquid asset spectrum. I may have the opportunity to choose between working in Fixed Income or Equity Portfolio management. One factor in my decision is obviously comp and the possible trajectory throughout the entire career.
Any insights in terms of relative comp between the two asset classes, both in the US and Europe, would be greatly appreciated.
They're both going to pay quite well. I would think more about long term objectives. Do you want to be an equity investor or a FI investor? A few years under your belt could make you attractive to major firms in either (they likely would still make you go through the analyst route to prove your worth in their platform - depending on experience). There are also niches that are growing, like Private Credit in the FI space. A strategic move away from fee compression.
Don't have specifics for you but general rule of thumb is that FI pays less than Equities. Rationale is simply that upside is capped in credit and theoretically unlimited in equities. That being said, competition tends to be less intense in many pockets of FI so you can have a long, stable, and rewarding career.
Agree with Rickle (as always) that your analysis should be based on your own personality and investing style. If you're more of a glass half-empty, risk-off, cross every T and dot every I type with a healthy dose of "what could go wrong" paranoia, consider credit over equities.
All good points
But to your last point, equities are a pimple in PIMCOs business so makes sense. But I highly doubt the likes of Fidelity/Capital are paying their FI PMs as much as their Equity PMs?
Can you elaborate on your CLO vs. equity hedge fund point? Seems to imply that CLOs aren’t a high upside place to be?
That made me laugh (you're description of the FI mindset). Probably partly true but don't forget there is opportunistic side to FI investing as well. Clearly not the same as equity but not as dull as it sounds. Private Credit might be a good example.
I forgot to mention baggy suits and mustard stains as prerequisites to be a credit guy. Hopefully that glams it up more for OP
Disagree that FI pays less than in equities. I think the smaller discount is more prevalent in the private space (PE vs. private credit) as it's true that upside can be higher and both can be time intensive. Even then I heard it's narrowing as rate of capital deployment is faster in the private credit space and AUM grows vs. equity (see Apollo). I think the 2 key points is (i) scale and (ii) fees. In the public space, it's all about scale. If you take can scale up AUM and have less headcount per fund then you'll pay well. That is the case for a lot of FI funds as there tends to be more names assigned per Analyst / PM vs. in the equity space i.e., less headcount per $ of AUM. For fees, the fixed income space has been stickier as it's been more proven to generate outsized returns vs. passive AGG index (just with how AGG is constructed). Fees also aren't significantly less than equities, i.e. if you take a look at Capital's webiste, their fixed income fees are generally the same as their equities fees for their mutual funds.
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